<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarterly Period Ended Commission File Number:
September 28, 1996 0-23234
L.A. T SPORTSWEAR, INC.
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(Exact name of registrant as specified in its charter)
Georgia 58-1724902
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1200 Airport Road, Ball Ground, Georgia 30107
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (770) 479-1877
-----------------------------
Not applicable
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(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of the latest practicable date:
Common Stock, without par value 4,200,001 shares
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Class Outstanding at November 12, 1996
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PART I. FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
L.A.T SPORTSWEAR, INC.
BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE DATA)
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<TABLE>
<CAPTION>
SEPTEMBER 28, DECEMBER 30,
ASSETS 1996 1995
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 1,937 $ 2,784
Accounts receivable (trade) - net 10,624 11,948
Inventories 25,246 33,104
Other current assets 2,908 3,513
---------- ---------
Total current assets 40,715 51,349
PROPERTY, PLANT, AND EQUIPMENT 4,965 5,841
OTHER ASSETS 386 192
---------- ---------
$ 46,066 $ 57,382
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 9,899 $ 8,354
Current portion of long-term debt 40 30,328
Accrued expenses 1,400 1,606
Restructuring reserves 1,418 2,050
---------- ---------
Total current liabilities 12,757 42,338
LONG-TERM DEBT 20,027 821
DEFERRED INCOME TAXES 520 578
STOCKHOLDERS EQUITY:
Preferred stock, 5,000,000 shares authorized;
no shares issued
Common stock, no par value; 25,000,000
shares authorized; 4,200,001 shares issued
and outstanding 10,825 10,825
Paid-in capital 3,304 3,304
Accumulated deficit (1,367) (484)
---------- ---------
Total stockholders' equity 12,762 13,645
---------- ---------
$ 46,066 $ 57,382
========== =========
</TABLE>
See notes to unaudited financial statements.
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<TABLE>
<CAPTION>
L.A. T SPORTSWEAR, INC.
STATEMENTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
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Quarter Ended Nine Months Ended
--------------------------- ----------------------------
September 28, September 30, September 28, September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
NET SALES $22,857 $33,680 $76,423 $96,854
COST OF GOODS SOLD 19,594 28,414 63,169 79,672
------- ------- ------- -------
Gross profit 3,263 5,266 13,254 17,182
OPERATING EXPENSES 3,859 4,775 12,486 14,126
------- ------- ------- -------
OPERATING (LOSS) PROFIT (596) 491 768 3,056
OTHER EXPENSE (PRINCIPALLY INTEREST) 458 761 1,651 1,716
------- ------- ------- -------
(LOSS) INCOME BEFORE INCOME TAXES (1,054) (270) (883) 1,340
(BENEFIT) PROVISION FOR INCOME TAXES (71) (103) 558
------- ------- ------- -------
NET (LOSS) INCOME $ (983) $ (167) $ (883) $ 782
======= ======= ======= =======
NET (LOSS) INCOME PER SHARE: $ (0.23) $ (0.04) $ (0.21) $ 0.19
======= ======= ======= =======
WEIGHTED AVERAGE SHARES OUTSTANDING 4,200 4,200 4,200 4,200
======= ======= ======= =======
</TABLE>
See notes to unaudited financial statements.
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<PAGE> 4
<TABLE>
<CAPTION>
L.A. T SPORTSWEAR, INC.
STATEMENTS OF CASH FLOW (UNAUDITED)
(IN THOUSANDS)
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NINE MONTHS ENDED
---------------------------
SEPTEMBER 28, SEPTEMBER 30,
1996 1995
<S> <C> <C>
OPERATING ACTIVITIES:
Net (loss) income $ (883) $ 782
Adjustments to reconcile net (loss) income to net
cash provided by (used in) operating activities:
Depreciation and amortization 663 563
Net (gain) loss on disposal of assets 2
Changes in assets and liabilities:
Accounts receivable 1,324 (7,306)
Inventories 7,858 (17,793)
Other 356 (677)
Accounts payable 1,545 12,844
Accrued expenses (206) 446
Restructuring reserves (632)
------- -------
Net cash provided by (used in) operating activities 10,025 (11,139)
INVESTING ACTIVITIES:
Purchase of property, plant, and equipment (171) (1,447)
Proceeds from sale of assets 381
------- -------
Net cash provided by (used in) investing activities 210 (1,447)
FINANCING ACTIVITIES:
Net borrowings under lines of credit 14,676 12,552
Payment of previous line of credit (24,119)
Proceeds from long-term borrowings 1,402
Payments of long-term borrowings (1,639) (456)
------- -------
Net cash (used in) provided by financing activities (11,082) 13,498
NET CHANGE IN CASH (847) 912
CASH, BEGINNING OF PERIOD 2,784 395
------- -------
CASH, END OF PERIOD $ 1,937 $ 1,307
======= =======
</TABLE>
See notes to unaudited financial statements.
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<PAGE> 5
L.A. T SPORTSWEAR, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
QUARTER ENDED SEPTEMBER 28, 1996 AND SEPTEMBER 30, 1995
1. ORGANIZATION AND BASIS OF PRESENTATION
L.A. T Sportswear, Inc. (the "Company") manufactures imprintable and
decorable sportswear and distributes undecorated garments for the imprinted
garment industry. The Company also purchases merchandise from several national
sportswear manufacturers for distribution through seven distribution facilities
located across the United States. The Company's customers consist principally
of single location retailers in the imprintable and decorable sportswear
industry. Such customers operate principally within North America.
The accompanying unaudited financial statements of the Company have been
prepared in accordance with generally accepted accounting principles for
interim financial information and the instructions for Form 10-Q. These
financial statements should be read in conjunction with the financial
statements and notes thereto included in the Company's Annual Report on Form
10-K filed with the Securities Exchange Commission for the year ended December
30, 1995. In the opinion of management, all adjustments (which include only
normal recurring adjustments) considered necessary for a fair presentation of
interim results have been included. The results of operations for the nine
months ended September 28, 1996 are not necessarily indicative of the operating
results for the full year.
2. INVENTORIES
Inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>
September 28, December 30,
1996 1995
<S> <C> <C>
Raw materials $ 1,220 $ 1,099
Work-in-process 399 1,170
Finished goods 23,627 30,835
------- -------
$25,246 $33,104
======= =======
</TABLE>
3. LONG-TERM DEBT
On April 29, 1996, the Company entered into a $35 million credit facility
("new facility") with a new financial institution. The new facility (i)
initially provided for maximum borrowings of $35 million which declined to $30
million on July 31, 1996 (subject to certain collateral restrictions based on
eligible receivables, inventories and fixed assets), (ii) expires in the second
quarter of 1999, (iii) initially had an interest rate of prime plus 1/2%, (iv)
is secured by principally all the Company's assets, (v) requires the payment of
certain fees, and (vi) contains covenants which (among other things) require
compliance with certain financial tests and restrict certain corporate
activities. The new facility replaced the previous line of credit and term
loan facility (and all borrowings thereunder were consequently repaid). The
new facility was amended on November 12, 1996. The amendment modified certain
covenants to reflect current and projected operating results and waived certain
defaults. The amendment also changed the borrowing rate to prime plus 1%.
4. PENDING LITIGATION
The Company (including certain of its officers and directors) is a defendant
in a lawsuit concerning certain alleged omissions in its January 1994 initial
public offering documents. The plaintiff seeks unspecified amounts of
damages. The Company intends to defend this matter vigorously. The ultimate
outcome of this matter cannot presently be determined. Accordingly, no
provision for any loss that may result from their resolution has been made in
the accompanying financial statements.
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the components
of the Company's statements of operations expressed as a percentage of net
sales.
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
---------------------------- -----------------------------
September 28, September 30, September 28, September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net Sales 100.0% 100.0% 100.0% 100.0%
----- ----- ----- -----
Cost of goods sold 85.7 84.4 82.7 82.3
----- ----- ----- -----
Gross profit 14.3 15.6 17.3 17.7
Operating expenses 16.9 14.1 16.3 14.5
----- ----- ----- -----
Operating (loss) profit (2.6) 1.5 1.0 3.2
Interest expense 2.0 2.3 2.2 1.8
----- ----- ----- -----
(Loss) income before income taxes (4.6) (0.8) (1.2) 1.4
(Benefit) provision for income taxes (0.3) (0.3) -- 0.6
----- ----- ----- -----
Net (loss) income (4.3)% (0.5)% (1.2)% 0.8%
===== ===== ===== =====
</TABLE>
Third Quarter of 1996 Compared to Third Quarter of 1995
The Company's net sales decreased approximately $10.8 million, or 32.1%,
to $22.9 million in the third quarter of 1996 from $33.7 million in the third
quarter of 1995. The decrease in net sales was primarily attributable to
sluggishness in the industry combined with the closing of two distribution
centers at the end of 1995 that were operating in the third quarter of 1995,
as well as the closing of the screen print operations during the third quarter
of 1996. The facility closings were part of the December 1995 restructuring.
The Company's gross profit decreased approximately $2.0 million, or 38.0%,
to $3.3 million for the third quarter of 1996 from $5.3 million in the third
quarter of 1995. As a percentage of net sales, gross profit margin decreased
to 14.3% in the third quarter of 1996 from 15.6% in the third quarter of 1995.
The decline in gross profit is attributable to both the decrease in net sales
and to intensified competitive pricing.
Operating expenses decreased approximately $916,000, or 19.2%, to $3.9
million in the third quarter of 1996 from $4.8 million in the third quarter of
1995. The decrease in operating expenses is due primarily to the Company's
closing of two distribution centers and the screen print operations as part of a
restructuring plan implemented during the 1995 fourth quarter. The benefits of
the restructuring were partially offset by the Company's investment in
operational and administrative improvements. As a percentage of net sales,
operating expenses increased to 16.9% in the third quarter of 1996 from 14.1%
in the third quarter of 1995 as a result of lower net sales.
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<PAGE> 7
As a result of the decrease in net sales and gross profit margin, the
Company had an operating loss of approximately $(596,000) in the third quarter
of 1996 compared to an operating profit of $491,000 in the third quarter of
1995. As a percentage of net sales, the operating loss was (2.6)% in the third
quarter of 1996, compared to an operating profit margin of 1.5% in the third
quarter of 1995.
Interest expense decreased approximately $303,000, or 39.8%, to $458,000
in the third quarter of 1996 from $761,000 in the third quarter of 1995,
primarily due to reduced borrowings under the Company's line of credit and as a
result of lower accounts receivable and inventories.
Loss before income taxes increased approximately $784,000 to $(1.1
million) in the third quarter of 1996 from $(270,000) in the third quarter of
1995. Loss before income taxes as a percentage of net sales was (4.6)% in the
third quarter of 1996, compared to (0.8)% in the third quarter of 1995.
Net loss increased approximately $816,000 to $(983,000) in the third
quarter of 1996 from $(167,000) in the third quarter of 1995. Net loss as a
percentage of net sales increased to (4.3)% in the third quarter of 1996 from
(0.5)% in the third quarter of 1995.
First Nine Months of 1996 Compared to First Nine Months of 1995
The Company's net sales decreased approximately $20.4 million, or 21.1%,
to $76.4 million in the first nine months of 1996 from $96.8 million in the
first nine months of 1995. The decrease in net sales was primarily
attributable to sluggishness in the industry combined with the closing of two
distribution centers at the end of 1995 that were operating in the first nine
months of 1995 and the closing of the screen print operations during the third
quarter of 1996.
The Company's gross profit decreased approximately $3.9 million, or 22.9%,
to $13.3 million for the first nine months of 1996 from $17.2 million in the
first nine months of 1995. The decline is primarily related to the decline in
net sales and to intensified competitive pricing. As a percentage of net
sales, gross profit margin decreased to 17.3% in the first nine months of 1996
from 17.7% in the first nine months of 1995.
Operating expenses decreased approximately $1.6 million, or 11.6%, to
$12.5 million in the first nine months of 1996 from $14.1 million in the first
nine months of 1995. The decrease in operating expenses is due primarily to
the Company's closing of two distribution centers and the screen print
operations as part of a restructuring plan implemented during the 1995 fourth
quarter. The benefits of the restructuring were partially offset by the
Company's investment in operational and administrative improvements. As a
percentage of net sales, operating expenses increased to 16.3% in the first
nine months of 1996 from 14.5% in the first nine months of 1995.
As a result of the decrease in net sales and gross profit margin,
operating profit decreased approximately $2.3 million to $768,000 in the first
nine months of 1996 from $3.1 million in the first nine months of 1995. As a
percentage of net sales, operating profit decreased to 1.0% in the first nine
months of 1996 from 3.2% in the first nine months of 1995.
Interest expense was approximately $1.7 million in the first nine months
of 1996 and the first nine months of 1995.
Income (loss) before income taxes decreased approximately $2.2 million to
a loss of $(883,000) in the first nine months of 1996 from income of $1.3
million in the first nine months of 1995. Income (loss) before income taxes as
a percentage of net sales decreased to (1.2)% in the first nine months of 1996
from 1.4% in the first nine months of 1995.
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<PAGE> 8
Net income decreased approximately $1.7 million to a loss of $(883,000) in
the first nine months of 1996 from $782,000 in the first nine months of 1995.
Net income as a percentage of net sales decreased to (1.2)% in the first nine
months of 1996 from 0.8% in the first nine months of 1995.
In December 1995, the Company implemented a restructuring plan that
contemplated, among other things, the closing of two distribution facilities, a
manufacturing facility and the screen print operations. As a result of the
continuing effects of the restructuring plan, combined with a historically
slower fourth quarter, management anticipates that the Company's operating
results may decline for the remainder of 1996. Management continues to focus
on operational and administrative improvements in order to restore
profitability on a longer-term basis.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operations was approximately $10.0 million for the
first nine months of 1996 compared to net cash used in operations of $11.1
million in the first nine months of 1995. The net cash provided by operations
in the first nine months of 1996 was primarily generated through reduced
inventory and accounts receivable levels.
On April 29, 1996, the Company entered into a $35 million credit facility
(the "new facility") with a new financial institution. The new facility (i)
initially provided for maximum borrowings of $35 million which declined to $30
million on July 31, 1996 (subject to certain collateral restrictions based on
eligible receivables, inventories and fixed assets), (ii) expires in the second
quarter of 1999, (iii) initially had an interest rate of prime plus 1/2%, (iv)
is secured by principally all the Company's assets, (v) requires the payment of
certain fees, and (vi) contains covenants which, among other things, require
compliance with certain financial tests and restrict certain corporate
activities. This new facility replaced the previous line of credit and term
loan facility (and all borrowings thereunder were consequently repaid). As of
September 28, 1996, the Company had $519,000 of additional borrowing available
under the new facility. The new facility was amended on November 12, 1996.
The amendment modified certain covenants to reflect current and projected
operating results and waived certain defaults. The amendment also changed the
borrowing rate to prime plus 1%.
The Company's ability to fund its working capital and capital expenditure
requirements, make interest payments and meet its other cash requirements
depends, among other things, on internally generated funds and the continued
availability of and compliance with the terms of its credit facility.
Management further believes that internally generated funds and funds available
from the Company's line of credit will be sufficient to meet the Company's
capital requirements and operating needs in fiscal 1996. However, if there is
a significant reduction of internally generated funds or the Company is unable
to meet the operating projections used in amending the credit facility, the
Company may require additional funds from outside financing sources. In such
event, there can be no assurance that the Company will be able to obtain such
funding as and when required or on acceptable terms.
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<PAGE> 9
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
On August 19, 1996, the United States District Court for the Northern
District of Georgia denied a motion for class certification sought by the
plantiff in one of two class action suits previously filed against the Company.
In March 1994, Edward L. Slate filed a class action lawsuit against the
Company, its directors and executive officers and the managing underwriter of
the Company's initial public offering, alleging that the offering documents
contained a material omission, therfore making those documents materially false
and misleading. In May 1995, Omega partners L.P. filed a separate class action
against the same defendants. The Company denied the allegations contained in
these actions.
The court denied Slate's motion for class certification, finding that
Slate was not a member of the class that could assert one of the claims alleged
in the Complaint. On August 27, 1996, Slate filed a Motion for Reconsideration
of the denial of class certification. The court has not yet ruled on such
motion. On August 30, 1996, Omega Partners L.P. voluntarily dismissed its
action against the Company.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Exhibit 27 - Financial Data Schedule (for SEC use only).
(b) Reports on Form 8-K. No report on Form 8-K was filed during
the quarter ended September 28, 1996.
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<PAGE> 10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
L.A. T SPORTSWEAR, INC.
Dated: 11/12/96 , 1996 By: /s/ Isador E. Mitzner
------------- ----------------------------------------
Isador E. Mitzner, Chairman
and Chief Executive Officer
Dated: 11/12/96 , 1996 By: /s/ Robert C. Aldworth
------------- ----------------------------------------
Robert C. Aldworth
Chief Operating Officer
(acting principal financial and
accounting officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF L.A.T SPORTSWEAR FOR THE NINE MONTHS ENDED SEPTEMBER
28, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-START> DEC-31-1995
<PERIOD-END> SEP-28-1996
<CASH> 1,937
<SECURITIES> 0
<RECEIVABLES> 12,902
<ALLOWANCES> 2,278
<INVENTORY> 25,246
<CURRENT-ASSETS> 40,715
<PP&E> 8,041
<DEPRECIATION> 3,076
<TOTAL-ASSETS> 46,066
<CURRENT-LIABILITIES> 12,757
<BONDS> 0
0
0
<COMMON> 10,825
<OTHER-SE> 1,937
<TOTAL-LIABILITY-AND-EQUITY> 46,066
<SALES> 76,423
<TOTAL-REVENUES> 76,423
<CGS> 63,169
<TOTAL-COSTS> 63,169
<OTHER-EXPENSES> 11,954
<LOSS-PROVISION> 532
<INTEREST-EXPENSE> 1,651
<INCOME-PRETAX> (883)
<INCOME-TAX> 0
<INCOME-CONTINUING> (883)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (883)
<EPS-PRIMARY> (.21)
<EPS-DILUTED> (.21)
</TABLE>
